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Inclusion of crypto in 5AMLD first step to sector regulation

Jackson, Olly.  ; London (Apr 26, 2018).

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London Block Exchange chief executive says EU regulation is a positive for the sector

The European Union has updated its latest Anti-Money Laundering Directive (5AMLD) to include crypto exchanges and custodian wallet providers, the first of many expected moves to account for ongoing concerns surrounding digital currencies.

The new framework, released 19th of April 2018, obliges exchanges and wallet providers to conduct know-your-customer (KYC) and money laundering checks on investors. While this is a landmark for the sector, regulation for initial coin offerings (ICOs), new tokens and transfers between virtual currencies is expected by the end of the year.

London Block Exchange founder and chief executive Benjamin Dives said that added EU regulation is a positive for investors and gives them reassurance that they are investing safely. As for the rules themselves, Dives said they will not have much of an effect on exchanges and investors.

“There are no exchanges I’m aware of that don’t conduct KYC and AML checks already,” he added.

Cryptocurrency exchanges – those that transfer fiat currency into cryptocurrencies - and custodian wallet providers, which hold, transfer or store cryptocurrency account keys required to access cryptocurrency funds, are now forced to comply with the directive just as any corporate or legal entity would. The directive also stipulated that competent authorities should be able to monitor the use of virtual currencies and national financial intelligence units to obtain information allowing them to associate virtual currency addresses to the identity of the owner.

One major misconception is that cryptocurrencies are entirely anonymous when they are, in fact, pseudonymous because users each have their own exclusive account key. Authorities are able to trace the account key back to the internet service provider of a user and can therefore identify the investor.

Concerns have pervaded the cryptocurrency sector that increased regulation...